Bill Text: NJ S886 | 2024-2025 | Regular Session | Introduced
Bill Title: Provides for establishment of child support lien against life insurance proceeds; requires insurers perform child support judgment search.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced) 2024-01-09 - Introduced in the Senate, Referred to Senate Commerce Committee [S886 Detail]
Download: New_Jersey-2024-S886-Introduced.html
STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Senator ANTHONY M. BUCCO
District 25 (Morris and Passaic)
SYNOPSIS
Provides for establishment of child support lien against life insurance proceeds; requires insurers perform child support judgment search.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning child support and amending P.L.2000, c.81, N.J.S.17B:24-6, N.J.S.17B:24-7, and N.J.S.17B:24-9.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 1 of P.L.2000, c.81 (C.2A:17-56.23b) is amended to read as follows:
1. a. (1) Lien against net proceeds; civil judgment, arbitration award, inheritance or worker's compensation. A judgment for child support entered pursuant to P.L.1988, c.111 (C.2A:17-56.23a) and docketed with the Clerk of the Superior Court shall be a lien against the net proceeds of any settlement negotiated prior or subsequent to the filing of a lawsuit, civil judgment, civil arbitration award, inheritance or workers' compensation award whenever the net proceeds exceed a threshold of $2,000. A lien created under this section shall apply to any net proceeds payable to the prevailing party or beneficiary. The lien shall have priority over all other levies and garnishments against the net proceeds of any settlement negotiated prior or subsequent to the filing of a lawsuit, civil judgment, civil arbitration award, inheritance or workers' compensation award unless otherwise provided by the Superior Court, Chancery Division, Family Part. The lien shall not have priority over levies to recover unpaid income taxes owed to the State. The lien shall stay the distribution of the net proceeds to the prevailing party or beneficiary until the child support judgment is satisfied.
As used in this act "net proceeds" means any amount of money [, in excess of $2,000,] payable to the prevailing party or beneficiary after attorney fees, witness fees, court costs, fees for health care providers, reasonable funeral expenses, payments to the Medicaid program under section 6 of P.L.1979, c.365 (C.30:4D-7.1), reimbursement to the [Division of Employment Security] Division of Income Security in the Department of Labor and Workforce Development, the employer or employer's insurance carrier for temporary disability benefits that may have been paid pending the outcome of a workers' compensation claim as provided by section 1 of P.L.1950, c.174 (C.34:15-57.1), reimbursement to an employer or the employer's workers' compensation insurance carrier as provided in R.S.34:15-40, and other costs related to the lawsuit, inheritance or settlement are deducted from the award, proceeds or estate; "prevailing party" or "beneficiary" shall not include a partnership, corporation, limited liability partnership, financial institution, government entity or minor child under the age of 16; and "agent" means an authorized representative of the prevailing party or beneficiary, a union representative, an executor or administrator of a decedent's estate, an arbitrator or any other person or entity if such person or entity is responsible for the distribution of net proceeds to a prevailing party or beneficiary.
(2) Lien against proceeds of annuity contract or policy of individual or group life insurance. A judgment for child support entered pursuant to P.L.1988, c.111 (C.2A:17-56.23a) and docketed with the Clerk of the Superior Court against a person who has affected an annuity contract or a policy of individual or group life insurance on his own life or who is the beneficiary of a life insurance policy shall be a lien against the proceeds of the annuity contract or life insurance policy at the time the proceeds become available for the use of the insured's estate or beneficiary including the cash surrender value of a life insurance policy, annuity, or a loan against the cash value or surrender value of an insurance policy or annuity, excluding loans for premium payments. The lien shall stay the distribution of the proceeds of the annuity contract or life insurance policy to the insured's estate or beneficiary until the child support judgment is satisfied.
The provisions of this act shall also apply in the case of an assignment or sale of a viatical settlement contract or life settlement but shall not apply to funeral insurance policies, credit life insurance policies or to the payment of reasonable funeral expenses.
b. Before distributing any net proceeds of a settlement, judgment, inheritance or award to the prevailing party or beneficiary and before distributing the proceeds of an annuity contract or a life insurance policy in any amount to the insured's estate or beneficiary, the following actions shall be taken:
(1) the prevailing party [or] , beneficiary or insured's estate or beneficiary shall provide the attorney, insurance company or agent responsible for the final distribution of such funds or, in the case of the distribution of the proceeds of an annuity contract or a life insurance policy, the insurance company responsible for issuing the annuity contract or insurance policy with a certification that includes the prevailing party's [or] , beneficiary's or insured's and his beneficiary's full name, mailing address, date of birth and Social Security number; and
(2) the attorney representing the prevailing party or beneficiary or, in the case of the distribution of the proceeds of an annuity contract or a life insurance policy, the insurance company responsible for issuing the annuity contract or insurance policy shall initiate a search of child support judgments, through a private judgment search company that maintains information on child support judgments, to determine if the prevailing party [or] , beneficiary or insured and his beneficiary is a child support judgment debtor. The judgment search required under this section shall not be required if a prevailing party or beneficiary is a minor child under the age of 16, except in the case of the distribution of the proceeds of an annuity contract or a life insurance policy.
If the prevailing party or beneficiary is not represented by an attorney, the judgment search shall be initiated by the opposing attorney, insurance company or agent before the proceeds are distributed to the prevailing party or beneficiary. [n] In the case of a workers' compensation action, the Administrative Office of the Courts shall, at least once every 60 days, transmit information on child support judgment debtors to the Division of Workers' Compensation in the Department of Labor and Workforce Development. The information shall include the debtor's name, Social Security number, the amount of the child support judgment, the Probation Division case number and the Probation Division office to which the judgment is payable. The Division of Workers' Compensation shall match the data received on child support judgment debtors against the information it maintains for individuals who have filed workers' compensation claims with the division. When a match is identified, the Division of Workers' Compensation shall notify the appropriate judge of compensation of the child support judgment before the decision, award, determination, judgment or order approving the settlement is rendered. The judge of compensation shall incorporate in the decision, award, determination, judgment or order approving the settlement, an order requiring the employer or the employer's insurance carrier to contact the Probation Division to satisfy the child support judgment out of the net proceeds of the workers' compensation award, order or settlement before any such monies are paid to the employee. The Division of Workers' Compensation shall be immune from any civil liability that may arise from any information provided by the division or any order issued by a judge of compensation relating to a child support judgment, in accordance with this section. In the case of judgments or settlements resulting from a labor arbitration involving employees of a school board or school district, a judgment search shall be initiated by the school board or district prior to the release of any net proceeds to the employees and only if there is an income withholding for child support active against the employee in the records of the school board or district. In the case of an inheritance, the executor or administrator of the decedent's estate shall initiate the judgment search. The judgment search company shall provide a certification to the attorney, insurance company, agent or party initiating the lawsuit, or in the case of the distribution of the proceeds of an annuity contract or a life insurance policy, the insurance company responsible for issuing the annuity contract or insurance policy identifying whether or not the prevailing party [or] , beneficiary or insured or his beneficiary is a child support judgment debtor.
In the case of net proceeds that are to be paid through a structured settlement or other payment plan, the attorney, insurance company or agent shall be required to conduct the child support judgment search only at the time of settlement or prior to the distribution of the first payment under the plan. If a child support judgment is identified, the attorney, insurance company or agent shall provide the Probation Division with a copy of the structured settlement or payment plan within 30 days of identifying the child support judgment.
If there are no attorneys representing either party in a civil lawsuit, the party bringing the lawsuit shall initiate the judgment search and shall be required to file the certification with the court at least 10 working days prior to the trial or with the stipulation that the certification shall be filed at the time of the settlement or dismissal of the lawsuit.
For monies deposited with the court, no distribution of funds shall be made until the attorney, prevailing party or beneficiary provides the Clerk of the Superior Court with a copy of the certification showing that the prevailing party or beneficiary is not a child support judgment debtor.
The fee for a judgment search which is required by this section shall not exceed $10 for each name of a child support judgment debtor that is searched. The fee for a judgment search is chargeable against the net proceeds or proceeds of an annuity contract or a life insurance policy as a cost of the settlement, judgment, inheritance or award, or as a cost of distributing the proceeds of the annuity contract or insurance policy.
c. If the certification shows that the prevailing party [or], beneficiary or insured or his beneficiary is not a child support judgment debtor, the net proceeds or proceeds of the annuity contract or life insurance policy may be paid to the prevailing party [or], beneficiary or insured's estate or beneficiary immediately. If the certification shows that the prevailing party [or], beneficiary or insured or his beneficiary is a child support judgment debtor, in a case monitored by the Probation Division of the Superior Court, the attorney, insurance company or agent that initiated the search shall contact the Probation Division of the Superior Court to arrange for the satisfaction of the child support judgment from the net proceeds or proceeds of the annuity contract or life insurance policy. The attorney, insurance company or agent shall notify the prevailing party [or], beneficiary or insured's estate or beneficiary of the intent to satisfy the child support judgment prior to the disbursement of any funds to the prevailing party [or], beneficiary or insured's estate or beneficiary. Upon receipt of a warrant of satisfaction for the child support judgment, the attorney, insurance company or agent shall pay the balance of the settlement, judgment, award [or], inheritance or proceeds of the annuity contract or life insurance policy to the prevailing party [or], beneficiary or insured's estate or beneficiary. If the net proceeds or proceeds of the annuity contract or life insurance policy are less than the amount of the child support judgment, the [entire amount of the] net proceeds or proceeds of the annuity contract or insurance policy shall be paid to the Probation Division as partial satisfaction of the judgment. If the beneficiary of the annuity contract or life insurance policy is the person to whom the child support is owed under a judgment or is the subject child of the underlying child support order, this subsection shall have no effect relative to the distribution of proceeds from an annuity contract or a life insurance policy to the beneficiary.
If there are no attorneys representing either party in a civil lawsuit and the certification filed with the court shows that the prevailing party or beneficiary is a child support judgment debtor, the court shall order that the opposing party pay the amount of the child support judgment to the Probation Division before any funds are paid to the prevailing party or beneficiary. The court shall also insure that any judgment related to the lawsuit docketed with the Clerk of the Superior Court reflect the Probation Division's superior claim to such funds.
d. An attorney, insurance company or agent shall not be liable for distributing net proceeds to the prevailing party or beneficiary or, in the case of the distribution of the proceeds of an annuity contract or a life insurance policy, the insured's estate or beneficiary based on the results of a judgment certification showing the prevailing party [or], beneficiary or insured or his beneficiary is not the debtor of a child support judgment, if it is later shown that the prevailing party [or], beneficiary or insured's estate or beneficiary provided inaccurate personal information on the initial certification to the attorney, the insurer or agent.
e. An attorney, insurance company or agent who, in accordance with this act, satisfies a child support judgment from the net proceeds of a settlement, judgment, inheritance [or], award or the proceeds of an annuity contract or a life insurance policy, shall not be liable for payments which otherwise would have been made pursuant to subsection a. of this section which were not so identified to the attorney, insurance company or agent at the time of satisfaction.
f. An attorney, insurance company or agent who, in accordance with this act, satisfies a child support judgment from the net proceeds of a settlement, judgment, inheritance [or] , award or the proceeds of an annuity contract or a life insurance policy, shall not be liable to the prevailing party [or], beneficiary or insured's estate or beneficiary or to that party's or insured's creditors.
g. An attorney shall not be required to challenge a child support judgment unless retained by the prevailing party [or], beneficiary or insured's estate to do so.
h. A private judgment search company is prohibited from using any information provided by an attorney, insurance company or agent in accordance with this act for any purpose other than: (1) determining if the prevailing party [or], beneficiary or the insured or his beneficiary is the debtor of a child support judgment; and (2) preparing a certification as required pursuant to subsection b. of this section.
i. To the extent feasible and permitted by the Rules of Court, the Administrative Office of the Courts may share information on a child support judgment debtor with an insurance carrier for the sole purpose of complying with the provisions of P.L.2000, c.81 (C.2A:17-56.23b et al.).
(cf: P.L.2000, c.81, s.1)
2. N.J.S.17B:24-6 is amended to read as follows:
17B:24-6. a. If a policy of insurance, whether heretofore or hereafter issued, is affected by any person on his own life, or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, then the lawful beneficiary, assignee or payee of such policy, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted, or the policy is made payable to the person whose life is insured or to the executors or administrators of such person if the beneficiary shall predecease such person.
Except however the foregoing shall not be applicable if the lawful beneficiary, assignee or payee of such policy is any of the following:
(1) The insured,
(2) The person so effecting such insurance, or
(3) The executors or administrators of such insured or the person so effecting such insurance.
b. [Such] Except as provided in subsection d., such proceeds and avails shall be exempt from any liability for any debt of the beneficiary existing at the time the proceeds and avails become available for his use; provided that, subject to the statute of limitations, the amount of any premiums for such insurance paid with intent to defraud creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy; but the insurer issuing the policy shall be discharged of all liability thereon by payment of its proceeds in accordance with its terms, unless, before such payment, the insurer shall have received written notice at its home office, by or in behalf of a creditor, of a claim to recover for transfer made or premiums paid with intent to defraud creditors setting forth such facts as will enable the insurer to ascertain the particular policy.
c. For the purposes of subsections a. and b. above, a policy shall also be deemed to be payable to a person other than the insured if and to the extent that a facility-of-payment clause or similar clause in the policy permits the insurer to discharge its obligation after the death of the individual insured by paying the death benefits to a person as permitted by such clause.
d. Nothing in this section shall apply to exempt the proceeds of a life insurance policy from a lien against the proceeds established pursuant to paragraph (2) of subsection a. of section 1 of P.L.2000, c.81 (C.2A:17-56.23b.) to satisfy a judgment for child support entered against the insured or the beneficiary.
(cf: P.L.1971, c.144, s.17B:24-6)
3. N.J.S.17B:24-7 is amended to read as follows:
17B:24-7. a. The benefits, rights, privileges, powers and options which under any annuity contract heretofore or hereafter issued are due or prospectively due the annuitant, shall not be subject to execution, garnishment, attachment, sequestration or other legal process nor shall the annuitant be compelled to exercise any such rights, privileges, powers, or options, nor shall creditors be allowed to interfere with or terminate the contract, except:
(1) As to amounts paid, with intent to defraud creditors, for or as consideration for any such annuity, with interest thereon, and of which the creditor has given the insurer written notice at its home office prior to the making of the payments to the annuitant out of which the creditor seeks to recover. Any such notice shall set forth such facts as will enable the insurer to ascertain the particular annuity contract.
(2) The total exemption of benefits presently due and payable to any annuitant periodically or at stated times under all annuity contracts under which he is an annuitant, shall not at any time exceed $500.00 per month for the length of time represented by such installments, and such periodic payments in excess of $500.00 per month shall be subject to garnishee execution to the same extent as are wages and salaries.
(3) If the total benefits presently due and payable to any annuitant under all annuity contracts under which he is an annuitant, shall at any time exceed payment at the rate of $500.00 per month, then the court may order such annuitant to pay to a judgment creditor or apply on the judgment, in installments, such portion of such excess benefits as to the court may appear just and proper, after due regard for the reasonable requirements of the judgment debtor and his family, if dependent upon him as well as any prior court orders.
(4) Notwithstanding any other provision of this section, benefits due and payable to an annuitant in any amount shall be subject to a lien established pursuant to paragraph (2) of subsection a. of section
1 of P.L.2000, c.81 (C.2A:17-56.23b.) to satisfy a judgment for child support entered against the annuitant.
b. If the contract so provides, the benefits, rights, privileges, powers or options accruing under such contract to a beneficiary or assignee shall not be transferable nor subject to commutation, and if the benefits are payable periodically or at stated times, the same exemptions and exceptions contained herein for the annuitant, shall apply with respect to such beneficiary or assignee.
(cf: P.L.1971, c.144, s.17B:24-7)
4. N.J.S.17B:24-9 is amended to read as follows:
17B:24-9. a. [A] Except as provided in subsection c., a policy of group life insurance or group health insurance or the proceeds thereof payable to the individual insured or to the beneficiary thereunder, shall not be liable, either before or after payment, to be applied by any legal or equitable process to pay any debt or liability of such insured individual or his beneficiary or of any other person having a right under the policy. The proceeds thereof, when not made payable to a named beneficiary or to a third person pursuant to a facility-of-payment clause, shall not constitute a part of the estate of the individual insured for the payment of his debts. Nothing herein contained shall apply to any income disability benefit in any action to recover for necessaries contracted for after the commencement of the disability covered by the disability clause or contract allowing such income benefit.
b. This section shall not apply to group insurance covering the debtors of a creditor, to the extent that such proceeds are applied to payment of the obligation for the purpose of which the insurance was so issued.
c. Nothing in this section shall apply to exempt the proceeds of a policy of group life insurance from a lien against the proceeds established pursuant to paragraph (2) of subsection a. of section 1 of P.L.2000, c.81 (C.2A:17-56.23b.) to satisfy a judgment for child support entered against the insured or the beneficiary.
(cf: P.L.1971, c.144, s.17B:24-9)
5. The Commissioner of Banking and Insurance shall, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt such rules and regulations as are necessary to effectuate the purposes of this act.
6. This act shall take effect immediately.
STATEMENT
This bill would amend section 1 of P.L.2000, c.81 (C.2A:17-56.23b) to require that if a person who has affected an annuity contract or a policy of individual or group life insurance on himself, or who is the beneficiary of a person's annuity contract or life insurance policy, is found to be a child support judgment debtor, a lien shall be placed on the proceeds of the contract or policy at the time the proceeds become available for the use of the person's estate or beneficiary. The lien would stay the distribution of the proceeds of the annuity contract or life insurance policy to the estate or beneficiary until the child support judgment is satisfied. Proceeds from the assignment or sale of a viatical settlement contract or life settlement are also subject to the provisions of the bill.
As provided in the bill, a lien can be placed on any net proceeds of any award, judgment, inheritance or settlement payable to a prevailing party or beneficiary, whenever the net proceeds exceed a threshold of $2,000, if the party is found to be a child support judgment debtor. The bill would provide that reasonable funeral expenses are not included as net proceeds. The $2,000 threshold would not apply to the proceeds of an annuity contract or life insurance policy; the child support lien would attach regardless of the amount of the proceeds.
Under the provisions of this bill, prior to the distribution of any of the proceeds of the annuity contract or life insurance policy to the insured's estate or beneficiary, the estate or beneficiary would be required to provide the insurance company responsible for issuing the contract or policy with a certification that includes the insured's and his beneficiary's name, mailing address, date of birth and social security number. The insurance company would then initiate a child support judgment search using a private judgment search company. The search would be used to determine whether the person or the person's beneficiary is a child support judgment debtor. This judgment search would not be required if a prevailing party or a beneficiary is a minor child under the age of 16, except in the case of the distribution of the proceeds of an annuity contract or life insurance policy. A fee of not more than $10 for each name of a child support judgment debtor searched would be permitted. This fee would be chargeable against the proceeds of the annuity contract or life insurance policy.
Under the bill, pre-paid funeral policies, credit life insurance policies and payment of reasonable funeral expenses are exempt from the provisions of the bill.
The judgment search company would provide a certification to the insurance company responsible for issuing the annuity contract or life insurance policy identifying whether the insured or his beneficiary is a child support judgment debtor. If a child support judgment is not found, the proceeds of the annuity contract or life insurance policy may be distributed to the insured's estate or beneficiary immediately. If a child support judgment against the insured or his beneficiary is found, in a case monitored by the Probation Division of the Superior Court, the insurance company would be required to contact the Probation Division and arrange for the satisfaction of the judgment prior to the disbursement of any funds.
The bill would also limit the liability of an insurance company when satisfying a judgment from the proceeds of an annuity contract or a life insurance policy. In addition, the bill prohibits a private judgment search company from using any information provided by an insurance company for purposes other than determining if the insured or his beneficiary is the debtor of a child support judgment.
The bill would also amend N.J.S.17B:24-6, N.J.S.17B:24-7, and N.J.S.17B:24-9 to clarify that the proceeds of an annuity contract and of individual and group life insurance are subject to a child support lien.
The Commissioner of Banking and Insurance would be required to adopt such rules and regulations as would be necessary to effectuate the purposes of the act.
